by Danny Halim, Vice President, Wholesale Distribution and 3PL Industry, JDA Software
Asian consumers are driving double-digit growth in e-commerce, giving the APAC region the fastest growth rate in the world. This rapid acceleration is attributed to the easy and affordable access to the Internet via smartphones. Even more stunning is that these smartphones socially connect millions of people from very diverse backgrounds, cultures and regions to get excited about new and cool product trends and then order, pay, receive and return their purchases. There are now more than $1tr in online sales across APAC. It is experiencing the fastest growth in mobile commerce in the world, and local e-commerce players are dominating the market.
This opens a great opportunity for logistics service providers to step up and play a key role in serving the APAC omni-channel. They can help shippers with greater agility, digitisation of the supply chain and managing labour costs too.
Will commerce grow faster than fulfilment?
The answer is very likely yes. In many areas of Asia Pacific, the rapid growth of the omni-channel may be getting ahead of the ability of retailers, manufacturers and shippers to fulfill orders and meet the expectations of consumers for fast delivery and quality service. Roads and other infrastructure need to be upgraded in many markets. The complex market geography that consists of lands and oceans always constrains fulfilment to the warehouses and last-mile deliveries. Definitely not easy to compare to the more consistent and mature conditions in North America or Europe. Furthermore, the global supply chain itself is much more complex now with many more players standing between the product manufacturer and the end consumer. This compounds the challenge of fulfilment.
Third-party logistics serves both growth and agility by leveraging technology
Third-party logistics (3PL) providers offer value-added solutions to the challenge of ensuring that fulfilment keeps pace with the growth of the omni-channel in APAC. 3PLs are intended to be agile and flexible, they have the scale, assets and expertise to help the shippers deliver to the customers. Given market growth rates, it’s no wonder that many global 3PL providers are investing heavily in the region. And they bring enormous and proven capacity to deliver products to consumers.
The timing for APAC is fortuitous because not only do modern 3PLs offer additional fulfilment capacity, they also provide the latest logistics technologies. During the early period of globalisation, from the 1980s to around the turn of the century, 3PLs focused on scaling capacity by building and consolidating their networks and becoming more efficient and costeffective in serving their markets. They built warehousing, cross-docking, track and trace, and distributed manufacturing capabilities. But now they can do even more for APAC.
New 3PL services for APAC
Over the past decade, the consumer industries have driven leading 3PLs to build new capabilities that leverage the digitisation of the supply chain to differentiate and expand their services. Most of these initiatives have been driven by the rise of the omni-channel and the concurrent advancements in logistics technologies. Together, they apply greater pressure on logistics services but also provide the solutions to satisfy those demands.
For example, free-of-charge next day and same day deliveries are now standard expectations for omni-channel consumers. Robotics and automation that optimise warehouses, distribution centres and transportation, as well as improvements in parcel and last mile delivery, help meet those expectations.
Managing rising labour costs in APAC
When we look at the opportunities provided by the growth of the omnichannel in APAC, we should also look at the potential roadblock of rising labour costs in the region that are not matched by gains in productivity. It is often said, “Logistics is 90 per cent software and the other half is labour,” as a joint article from SupplyChain 247 and Genco did recently.
This is a problem as research from Thomson Reuters has noted rapid increases in wages across the region with nearly a seven-fold increase in wages in China, for example. Unfortunately, increases in wages are usually not matched by increases in productivity, which opens a risky gap for anyone providing logistics.
Furthermore, the industry is experiencing a workforce crisis globally driven by ageing demographics. This can only apply greater pressure to raise wages to attract talent in a more competitive labour market. Therefore, this can negatively impact both logistics’ cost structures as well as a provider’s ability to satisfy omni-channel consumer expectations going forward.
Here again, the advanced logistics technologies implemented by leading 3PLs provide a solution. Digitisation enables real-time visibility into warehouse and transportation labour so employees can receive feedback, coaching and counseling to improve their productivity. Not only will this enable 3PLs to provide better service to their customers, it also helps them offset rising labour costs with greater productivity. Rather than looking at the productivity of the warehouse as a whole, providers can look at, and manage, the productivity of individual workers to create a culture of continuous improvement.
Future proofing the supply chain in APAC, JDA has worked with many global 3PLs to help enable them to provide end-toend logistics capabilities with greater visibility all along the chain. In many cases, achieving labour productivity gains – perhaps saving as much as US$2-3m in a typical warehouse – may provide the “low hanging fruit” in delivering stronger financial performance while serving the greater demands of the omni-channel. But that is just the beginning.
About the Author
Danny Halim is Vice President, Wholesale Distribution and 3PL Industry at JDA Software. In his 17-year tenure with JDA, Danny has built a reputation for building go-to-market strategies, incubating new business models, and directly getting involved with customers to identify opportunities and develop solutions.
He has spent the last five years developing business insights, driving innovations and leading cross-functional teams to deliver measurable results in the areas of supply chain planning, category management, distribution and logistics for many businesses globally. His solution delivery and product management experience in his earlier years helped him focus on pragmatic and value-driven approaches.
The article first appeared on Supply Chain Asia.